The Natural Order?

IMG_3027On December 1, 2016, Rémy Cointreau announced that it had reached a deal to acquire Seattle brand Westland Distillery.  The deal is to be structured as the purchase of Westland’s assets, anticipated to close by the end of the year.  Additional details of the acquisition were not disclosed.

Frequent readers of HoochLaw will note that I have a penchant for Westland’s products. Indeed there are a couple of bottles of Westland (the Peated and the Garryana) sitting on the bar in my office.  Those same readers would be forgiven for assuming that because I’ve mentioned Westland a number of times in these posts, they must be a client.  Unfortunately this is not the case; Westland has been ably represented by other counsel for as long as I’ve known of their product.  [Note: Should Rémy Cointreau find itself in need of local counsel following the acquisition I would be delighted to be of service.]

With that disclaimer out of the way, let me offend Seattle natives and Hooch purists by saying that the acquisition is – in my obviously biased opinion – a very good thing.  In fact, I believe it is a good thing not only for Westland but also for whiskey and those who love it.

Let me explain.

The making and selling of high quality whiskey is an extraordinarily capital-intensive venture.  What pours, dribbles or drips tantalizingly from the still or the parrot is relatively inexpensive.  But that isn’t the end product.  In order to put something truly worthwhile in the bottle, you need to store that precious liquid in large, cumbersome and difficult to store barrels – and for quite a long time.  Those barrels, too, aren’t all that expensive.  But, as the saying goes, time is money.  And with whiskey it isn’t just the fact that storing things takes time (and therefore money), it is also the fact that the longer you store it the less you end up with.  Your product literally evaporates.  All this conspires to make it very difficult for a small distilling operation to stay afloat – even before you consider the costs associated with marketing your product and satisfying your exorbitant excise tax obligation.  So much so that this HoochLawyer cautions all of his startup spirits clients that if they’re wanting to open a distillery to make their fortune they would be better off pursuing another opportunity.

Westland was fortunate enough to be founded with access to quite a bit of capital.  One of its two founders hailed from a wealthy family with interests in the timber industry here in Washington state (and around the world).  But as is often the case in a new venture – founders move on.  Westland was no exception, with co-founder Emerson Lamb leaving the company in November of last year (and presumably taking with him his access to ready and relatively inexpensive capital).

So what’s a fledgling spirits brand to do if it wants to keep growing?  It needs access to capital.  But more than that it needs a partner who can help it continue to raise its profile and obtain additional distribution.  Might it also benefit from having a parent organization that has a deep bench and significant organizational strengths?

Rémy Cointreau appears to bring all of this to the table.  Further – with their roots dating back to the early eighteenth century, it is relatively hard to argue with their credibility in the spirits industry.  And lastly, whiskey purists should take comfort in the fact that they’ve owned Bruichladdich for the last four years – a period in which that brand has produced some really remarkable product without any apparent interference from dreaded corporate overlords.

All this is a long way of saying that Westland fans (and fans of independent American whiskey brands generally) should relax.  Better to have a great product which meets success even though it is part of a larger organization than to have a great product which dies because it couldn’t stay afloat.

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